Diminished Ability to Handle Personal Finances
As people age, they gradually lose their ability to handle their own finances. Often, this process is so gradual that the person himself and those around him are unaware of what’s happening until something serious happens. The elderly control the most assets and are the most susceptible to financial scams and poor choices. As people get older, their financial affairs often get more complex. They must deal with complex choices on healthcare, long-term care, taxes, life insurance, pensions, Social Security and estate planning. Often just handling the routine chores of daily financial affairs become beyond reach. Recently The New York Times had an article discussing the research behind the loss of cognitive skills needed for personal finance. Steps to mitigate these inevitable problems include striving to simplify your financial affairs — consolidating your holdings in a small number of financial institutions, trimming your actual number of holdings, avoiding complex or exotic instruments. Another common solution is to use automatic bill paying where possible. People should also find trusted family members, friends or professionals who can step in when needed. Appropriate advanced directives such as powers of attorney and health care proxies also need to be in place. Planning for the inevitable will help avoid many of the worst potential pitfalls.
Most people devote far too little time to estate planning. It sounds like something only the very rich should do and even they ignore it as much as possible. Everyone should have a will and advanced directives — health care proxy, power of attorney, living will. While seniors are more likely to need these documents, anyone can be the victim of an accident or health emergency. Beneficiaries on IRAs and other retirement accounts and insurance policies should be reviewed periodically. Lacking the planning and documents, one can find his choices constrained or lacking in an emergency. Even with the proper planning and documents, it’s hard enough to handle end of life events or mid-life emergencies. Without the documents, it can be pure misery for caretakers and survivors and the best of intentions can be thwarted. I’ve yet to have a client say he would prefer to pass along extra money to the IRS or state tax departments rather than give the money to his family. But if the right planning doesn’t occur, paying unnecessary taxes happens all too frequently. At the same time, a patient’s wishes for care may not be implemented because the intentions weren’t documented or put in the hands of a trusted family member or friend. While unpleasant to contemplate, avoiding these topics can lead to unpleasant consequences. One recent article touching on end of life care was by Jane Brody in the Feb. 10, 2015 New York Times. http://well.blogs.nytimes.com/2015/02/09/know-the-hard-choices-prolonging-life-entails/?_r=0